General Cable trades; Life Technologies contracts on hedge; Henry Schein firms; CSG to price

By Rebecca Melvin

New York, Feb. 23 - General Cable Corp. bonds were active in trade Tuesday, as volume in the convertible bond market picked up from Monday's weak levels, but was still not anywhere near where traders would like it to be.

"There's no activity by which to gauge it," a New York-based sellside trader said when asked about the convertible market's performance Tuesday.

General Cable bonds - which were seen appealing only on an outright basis - were mixed. A 40% delta could be managed on the General Cable 0.875% convertibles, however, making them worthwhile for hedge players as well, one sellsider said.

Life Technologies Corp.'s old Invitrogen 1.5% bonds were in trade and contracted about 0.5 point on a hedged basis from Monday. That move was seen as more of function of the overall market conditions however, rather than related to anything specific to the bonds, a New York-based sellside analyst said.

"Maybe there was a big seller out there, but it's not a meaningful move," the analyst said.

Henry Schein Inc. looked to be edging higher. The medical device maker reported decent fourth-quarter earnings on Tuesday, with profit for the fourth quarter bumping up 54% and per share earnings exceeding estimates by a couple of cents, while revenue rose 13%.

At current levels, the six-month Henry Schein paper is pretty appealing, sources said.

Equinix Inc. convertibles were quiet despite the fact that the Foster City, Calif.-based networking services company plans to price a $500 million offering of eight-year senior notes.

"There's just not a lot happening right now. Normally, when a company is doing a straight bond deal, one would expect that that would affect the other paper, including the convertibles," a New York-based sellside analyst said.

He said that investors are in "the back seat" as concerns grow about the possibility of a hard landing for the Chinese economy.

"More and more, I'm hearing talk about whether or not to 'short' the Chinese economy in terms of property, real estate and related sectors. If they have a hard landing, it's going to have a pretty dramatic affect on the U.S. and Europe and commodities especially," the sellsider said.

The consensus is that the economy in China is overheating and there is a bubble, he said. The question is when that bubble will pop, and with the Communist government's support of the economy it's difficult to know when to short it.

"The bubble could last for awhile. If you're short, you don't want to get in there too early," the analyst said.

Issuance has been almost nonexistent for several weeks as market conditions have kept borrowers on the sidelines, but a new issue emerged after the market close Tuesday: CSG Systems International Inc. said that it plans to price about $130 million of seven-year convertible notes in a Rule 144A deal. Details on timing and talk on the deal couldn't ascertained by Prospect News' deadline.

Both General Cable bonds active

General Cable's 0.875% convertibles due 2013 traded at 81 875 on Tuesday, which was up 2.375 points from the previous session, according to Trace data.

The General Cable 4.5% convertibles due 2029 traded at 86.614, which was down 3.1 points from the previous session.

Shares of Highland Heights, Ky.-based General Cable were down $1.13, or 4.7%, to $23.12, which marked a continuation of a trend lower after the fiber optic cable and copper wire manufacturer reporting earnings that disappointed last week.

The shorter-dated General Cable 0.875% convertibles, which have a 3.5-year maturity, were seen as more interesting to investors than the longer-dated 4.5% General Cable convertibles, but both were active in trade on Tuesday.

The 0.875% bonds have a 78% premium and a higher yield of 6.375%, compared to the 4.625% yield on the longer-dated paper.

The lower delta 0.875% convertibles have a 34% to 35% delta, according to one sellsider, but another source said a delta as high as 40% could be used.

"At the end of the day, this bond is going to creep up to par, but that's still in 2013 and given where the bond is trading, yield-wise, it's probably not an aggressive buy name," the first sellsider said.

Still investors might want to swap out of the General Cable 4.5% bonds and into the 0.875% bonds.

The 4.5% bonds, which are considered an equity replacement with a 95% delta, are subordinated and have no gamma - with a put in 2019 - and the credit is not sure, the sellsider said.

Life Technologies contract 0.5 point

Life Technologies 1.5% convertibles due 2024 were quoted at 113.75 versus a share price of $50.16 early Tuesday. The bonds were seen as having contracted about 0.5 point on the day.

Shares of the Carlsbad, Calif.-based maker of medical research tools fell 66 cents, or 1.3%, to $39.50.

Last week the company said it completed offerings including $250 million of notes due 2013, $500 million of notes due 2015, and $750 million of notes due 2020. Proceeds will be used with cash on hand to repay and retire a $1.33 billion term loan and a $643 million term loan.

Henry Schein extends climb

Henry Schein 3% convertibles due 2034 traded at 125.802 versus a share price of $57.25 on Tuesday, which was on an 88% delta, and that compared to 122.93 bid, 123.12 offered versus $55.76 on Feb. 12, and 122.57 bid, 122.63 offered versus a share price of $55.35 on Feb. 3.

The climb of both shares and convertibles has extended since at least the end of January.

The paper can be put or called in six months.

"It's basically a six-month piece of paper and trades at 2.5 points over parity. The downside is de minimis," a West Coast based sellsider said.

Another sellsider, this one on the East Coast, said the company got through one of two more reporting events with very little vol, and that was another mark in the bond's favor.

The Melville, N.Y.-based provider of healthcare products and services beat estimates on earnings by 2 cents and guided 2010 earnings in line with previous forecasts.

Excluding items, non-GAAP income from continuing operations was $85.7 million or $0.93 per share, compared with the fourth quarter of 2008

Revenue rose 13% to $1.79 billion compared to the fourth quarter of 2008. Analysts were expecting revenue of $1.67 billion. Better revenue consisted of 8% growth in local currencies and 5% growth related to foreign currency exchange, the company said.

Going forward, the company sees 2010 earnings in line at $3.40 to $3.60 per share versus $3.47 earnings per share previously expected.

"I do like the way they look," a New York-based sellsider said of the convertibles.

Equinix quiet

The Equinix 4.75% convertibles due 2016 were seen at 131 versus a share price of $93.54 on Tuesday, according to a sellside analyst.

The Equinix 3% bonds due 2014 were at 102 bid, 103 offered versus the $93.54, and the Equinix 2.5% bonds due 2024 were at 104.1 bid, 104.8 offered versus that same share price.

That was essentially unchanged on the day, he said.

Shares of the Foster City, Calif.-based data center services provider shed $1.28, or 1.4%, to $93.23.

The company began a brief roadshow on Tuesday for its $500 million offering of eight-year senior notes (/BB-/), according to a market source. The roadshow wraps up on Thursday.

Citigroup Global Markets Inc. and J.P. Morgan Securities Inc. are joint bookrunners for the offering of notes, which is registered with the Securities and Exchange Commission.

Mentioned in this article:

CSG Systems International Inc. Nasdaq: CSGS

Equinix Inc. Nasdaq: EQIX

General Cable Corp. NYSE: BGC

Henry Schein Inc. Nasdaq: HSIC

Life Technologies Corp. Nasdaq: LIFE

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